Exhibit 17.5

-Refer to Exhibit 17.5,which shows greenhouse gas emissions for a given rate of electricity production.The marginal social benefit is found at _____
A) point c.
B) point a.
C) point b.
D) A
E) A'

Question

Exhibit 17.5
 
-Refer to Exhibit 17.5,which shows greenhouse gas emissions for a given rate of electricity production.The marginal social benefit is found at _____
A) point c. 
B) point a. 
C) point b. 
D) A 
E) A'

Quizplus · Accepted Answer

The marginal social benefit is equal to the marginal private benefit plus the external benefit, which in this case is the reduction of greenhouse gas emissions. At point C, the marginal social benefit equals the marginal private cost (the cost of producing the electricity), plus the external benefit, indicating that the optimal level of electricity production has been reached. Point A represents an output level where the marginal social benefit is greater than the marginal cost, indicating that production should be increased. Point B represents an output level where the marginal social benefit is less than the marginal cost, indicating that production should be decreased. Point A' is irrelevant as it is a mirror image of point A.

Exhibit 17.5 -Refer to Exhibit 17.5,which Shows Greenhouse Gas Emissions for a Gas